If Florida runs out of electricity
© St. Petersburg Times, published February 4, 2001
TALLAHASSEE -- After what has been happening in California, you'd think that Florida's politicians would drop energy deregulation for some safer pursuit, such as passing an income tax.
Trust us, they say, it will be different here.
I dropped in on the Florida Energy 2020 Study Commission the other day to hear how that could possibly be so.
It's true. There will be a difference.
But not much of one. California ran out of power. We won't. Otherwise, the result will be the same: To transfer value that customers have paid for from power companies whose profits are controlled by law to corporate parents and affiliates whose profits are controlled only by the market.
They can't lose.
Guess who will?
Here's the scheme. In the name of "competition," the law will require Florida's investor-owned utilities to spin off their generating plants, which now produce power at rates regulated by the Public Service Commission.
Thereafter, the generating plants will bid to sell power back to them, at prices regulated only by the market, which they will pass on more or less directly to you.
This could be good for everyone if the competition were free and open and fair. But that's not the plan.
The generating plants will be spun off, most likely, to corporate affiliates of Tampa Electric, Florida Power, FP&L, Gulf Power and TECO. The parent companies may decide to keep these new unregulated subsidiaries, or resell them to other energy companies such as Enron and Duke Energy.
But in the spinning-off process, the generating plants will go for "book value" though their market value may be worth billions of dollars more.
That's profit that ought to be shared with the customers who have already paid for the plants through their monthly bills.
Any genuine competitor that buys one of those plants will have to pay market price and charge for power accordingly. Since most Florida plants are old and relatively inefficient, the competitor would probably prefer to build its own, as Duke Energy tried to do only to be blocked by Florida's power monopolies and the Supreme Court. But it would be bidding against an incumbent company having the benefit of an artificially low value.
Either way, the retail customer loses, while parent company stockholders make a killing.
(They did it differently in California. Executives and parent companies took more than $9-billion out of California's two big retail utilities during the same time they were running up equivalent debts for which a public bailout is now proposed.)
None of this is really necessary to keep Florida from running out of juice. We need simply to let in anyone willing to speculate on building merchant plants to sell wholesale power over the grid.
Sen. Tom Lee, R-Brandon, a member of the study commission, made that point the other day with the help of Pat Wood III, chairman of the Texas Public Utility Commission, who had been brought to Tallahassee to preach the gospel of deregulation. If Florida did nothing else, Lee asked, should it at least change the law that excludes merchant plants?
"I would say absolutely," Wood replied. "It is an anomaly in the 50 states that this large state is a closed club."
In another magic moment, Lee asked an FP&L lawyer if the company would sell its generating assets to Duke for merely book value.
"I don't know the answer to that," said the lawyer.
But FP&L and the other closed-club members got what they wanted in the study commission's interim recommendation. Their ransom for opening Florida to competition is, to put it kindly, one of the most brazen acts of plunder ever plotted in this state.
Lee and several other commission members would have changed that if they could, but the democratic process had been suspended. It brought to mind the days of the old Pork Chop Gang, when Senate chairmen would hold committee meetings all by themselves, their pockets full of proxies.
There were 18 other members at the Commission table but Chairman Walter Revell might as well have had their proxies. When Commission member David Struhs, who is Florida's secretary of environmental protection, suggested an amendment to replace "book value" with "market value,." Struhs refused to allow it.
"David," he said, "I'm not sure we can handle an amendment."
And so there wasn't any.
There wasn't a roll call vote either.
"I can pretty well tell you that I will not vote for this proposal in the Senate," said Lee, who as Senate Rules chairman can see to it that no other senator votes for it.
But Lee won't be there forever to insist on a fair bill or no bill. The utilities figure that they can wait him out. It will be their fault, not his, if Florida runs out of power first.
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